While the warning signs are definitely there for a new recession (especially Brexit, the whole Trump vs China fiasco and China's own economical problems), the recent layoff wave that GP alludes to was rather certain "new media" outlets discovering that their business model was not as profitable as thought.
The Activision Blizzard case here is just short-sighted corporate greed. "Best financial results in history" but the bonus coffers of the C-level executives are not filled enough it seems.
Sure but they're the first thing I expect a Democrat-led government overturning in 2020.
The only thing saving us from an all-out (trade) war is that international leaders are wise enough to see Trump as a temporary disturbance which has to be endured for only one and a half more years until sanity takes place in the US government again.
In every large company there are always excess personnel, or departments or individuals who are not performing. I'm sure there are other large companies that semi-regularly fire a single digit % of their workforce, but because they are not games companies it doesn't hit the news.
The redundancies are mostly in 'publishing and esports', by the way.
> Meanwhile, in a press release to investors this afternoon, Activision CEO Bobby Kotick wrote: “While our financial results for 2018 were the best in our history, we didn’t realize our full potential. To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees.”
We did great! But we can do better with the help of our "extraordinarily talented employees"! Many of whom we are laying off!
Pure speculation: Given their doubling down in the Asian market by partnering with NetEase, I imagine that a lot of jobs (or that money) is going off shore to fund development, marketing, and sales there.
Expansion of contract employees as well I'm sure. Which is pretty common in the gaming industry as far as I can tell.
TBF that makes sense for a lot of gaming projects. Its tough to keep an FTE artist when all the art for a project is completed, but it doesn't really make for a great environment for talent.
Both are ways of giving money to shareholders, either as cash (dividends) or increased stock price (repurchases). What's notable is that Activision/Blizzard is not investing those profits in future games, R&D, etc. Kind of like saying "we have more money than we know what to do with".
I don't know how much money they have but it is clear they don't know what to do with it. Their 2019 outlook is rather bleak with barely a literal handful of releases.
It’s not that simple. EPS (earnings per share) is a key metric tracked by investors, and buybacks are a guaranteed way to increase that, vs the riskiness of r&d spending
increase dividend: pay more to shareholders (as opposed to anything else the business could do e.g. CapEx or raises for labor)
do stock repurchases: basically a way to launder money by evading taxes. the long and short is that instead of paying shareholders $100 via dividends, which are taxable dividend income, the co spends $100 to buy the shares (say 50 shares at $2 each). if the shares were purchased for $1 each, then the basis increases by $1, so the it only creates $50 taxable income.
I don't fully understand the specifics, I thought that dividend tax was generally 15% in the lower tax bracket, and wouldn't the $50 of non-dividend income be taxable at short term capital gains, or 40%? That means that the $100 of dividend income would be $15 in taxes vs $20 of taxes for the $50 in short term capital gains.
i'm assuming long term rate here: 15% income > $38K, 20% > $425K, which is the same as dividends; obviously, short term is way higher as you've noted.
so they'd pay half the taxes in this case - you can plug in different numbers to see a different effect, e.g. $50 purchase => $60 buyback across $1mil dollars. i probably should have done this for clarity's sake.
A dividend is money you pay to your owners as profit: if a business makes more than it’s expenses, that profit is either reinvested, held onto, or given back to shareholders as a dividend.
Repurchasing stock is more or less accomplishing the same thing, but by purchasing shares back from the market instead of just giving the money to shareholders. This makes their shares more valuable — but has different tax implications.
Both are ways to return profits to shareholders, and are activities usually done by mature businesses and not growing ones. (The reason a business returns money is it doesn’t know how to successfully reinvest the money.)
> The reason a business returns money is it doesn’t know how to successfully reinvest the money
Most companies that do not return money through dividends or stock buy backs are eventually pressured to do so by activist investors / hedge funds, even Apple. The only company which has managed to resist this is Amazon which is famous for cross-financing to enter a market and then totally dominate it with the funds from profitable parts of the company (e.g. AWS). It only works because Amazon stockholders in general know that this is the secret sauce behind Amazon's entire business model.
It means -> export capital (cash) from your business to your shareholders. Which reduces their exposure to your management and reduces your scope (as a manager) to create value.
Dividends are profits paid to shareholders (rather, than saved for a rainy day or spent on future operations).
Stock repurchases are a company buying stock back from shareholders, sometimes at higher than market value. Often these are seen as paying off investors similarly to non-reoccurring dividends. Sometimes companies do it move ownership back towards employees (by moving it back into benefit pools), but it's often as not these days that it just goes into executive salaries or board golden parachutes.
And one month ago 'Activision Blizzard Inc.’s Dennis Durkin will receive awards worth $15 million as part of his appointment to chief financial officer.'
I don't know, first image came to my mind was in a deeply frozen city (like the one in the movie The Day After Tomorrow), workers who just been laid off are exiting from tall towers. Some of them sitting on street, some joined fire pit barrel party, others just wandering aimlessly.
Those towers are really really tall, and bright, the setting sun makes them even brighter. Beautiful lights are shining through the glass, cold but colorful.
Among those towers, one of them looked especially alive, the one skinned with a big big screen. And on the screen, was the live view from the company's executive meeting, hosted by non other than the CEO, a well dressed, brilliant, sharp, humorous and polite man.
It was too far to make out what he said, strong wind and echos makes it hard to hear. The only few fragments I could recognize was:
"... Our financial situation this year were the best in our history ..."
"... Change must happen ... to help us reach our full potential ..."
"... the future with our extraordinarily talented employees ..."
How often is this occurring? I feel like we've been seeing lots of massive game companies releasing big titles, reaping huge profits, and then they fizzle and start laying people off.
Only esports and “publishing” is going to be cut from Blizzard, supposedly. I’m not sure what publishing means precisely. Game development isn’t being cut, I believe.
I remember being in middle school when Blizzard mentioned they were being bought by Activision on the Warcraft III strategy website (http://classic.battle.net/war3/). There was some mention of Vivendi, and I had no idea what it meant; I was an idiot and knew no economics, but it was clear from the wording of this announcement that WCIII and other RTS games would not be their focus. Then WoW staganation came, and blizzard pretty much gave up on SCII (see 2012) and on Diablo III (various things).
It has been interesting seeing Blizzard slowly become a shell of its former self.
It's unfortunate, as Blizzard used to be one of my most respected companies as some of the core attributes to their games was their high degree of polish unseen in many other developers.
Now it's increasingly being eaten by micro-transactions and riding popular franchises.
Looking back though, they might have made the right choice. So many respected PC gaming shops either closed or were consumed, chewed up and spit out. To name a few off the top of my head: Westwood Studios, Black Isle Studios, Looking Glass Studios, Rare. Making games is just excruciatingly hard and really tough to make into a consistent business model. Blizzard positioned themselves pretty well all things considered, but one can't help thinking the quality of their games might be at another level if they stayed away from Activision. But on the other hand Activision might have kept them alive. Let's not forget Blizzard put a lot of time into some big IPs that never even saw the light of day (Starcraft: Ghost and Titan).
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[ 2.0 ms ] story [ 117 ms ] threadThe Activision Blizzard case here is just short-sighted corporate greed. "Best financial results in history" but the bonus coffers of the C-level executives are not filled enough it seems.
The only thing saving us from an all-out (trade) war is that international leaders are wise enough to see Trump as a temporary disturbance which has to be endured for only one and a half more years until sanity takes place in the US government again.
The redundancies are mostly in 'publishing and esports', by the way.
> Meanwhile, in a press release to investors this afternoon, Activision CEO Bobby Kotick wrote: “While our financial results for 2018 were the best in our history, we didn’t realize our full potential. To help us reach our full potential, we have made a number of important leadership changes. These changes should enable us to achieve the many opportunities our industry affords us, especially with our powerful owned franchises, our strong commercial capabilities, our direct digital connections to hundreds of millions of players, and our extraordinarily talented employees.”
We did great! But we can do better with the help of our "extraordinarily talented employees"! Many of whom we are laying off!
TBF that makes sense for a lot of gaming projects. Its tough to keep an FTE artist when all the art for a project is completed, but it doesn't really make for a great environment for talent.
do stock repurchases: basically a way to launder money by evading taxes. the long and short is that instead of paying shareholders $100 via dividends, which are taxable dividend income, the co spends $100 to buy the shares (say 50 shares at $2 each). if the shares were purchased for $1 each, then the basis increases by $1, so the it only creates $50 taxable income.
edit: mistake
What am I missing?
so they'd pay half the taxes in this case - you can plug in different numbers to see a different effect, e.g. $50 purchase => $60 buyback across $1mil dollars. i probably should have done this for clarity's sake.
Repurchasing stock is more or less accomplishing the same thing, but by purchasing shares back from the market instead of just giving the money to shareholders. This makes their shares more valuable — but has different tax implications.
Both are ways to return profits to shareholders, and are activities usually done by mature businesses and not growing ones. (The reason a business returns money is it doesn’t know how to successfully reinvest the money.)
Most companies that do not return money through dividends or stock buy backs are eventually pressured to do so by activist investors / hedge funds, even Apple. The only company which has managed to resist this is Amazon which is famous for cross-financing to enter a market and then totally dominate it with the funds from profitable parts of the company (e.g. AWS). It only works because Amazon stockholders in general know that this is the secret sauce behind Amazon's entire business model.
Stock repurchases are a company buying stock back from shareholders, sometimes at higher than market value. Often these are seen as paying off investors similarly to non-reoccurring dividends. Sometimes companies do it move ownership back towards employees (by moving it back into benefit pools), but it's often as not these days that it just goes into executive salaries or board golden parachutes.
https://www.bloomberg.com/news/articles/2019-01-04/activisio...
Those towers are really really tall, and bright, the setting sun makes them even brighter. Beautiful lights are shining through the glass, cold but colorful.
Among those towers, one of them looked especially alive, the one skinned with a big big screen. And on the screen, was the live view from the company's executive meeting, hosted by non other than the CEO, a well dressed, brilliant, sharp, humorous and polite man.
It was too far to make out what he said, strong wind and echos makes it hard to hear. The only few fragments I could recognize was:
"... Our financial situation this year were the best in our history ..."
"... Change must happen ... to help us reach our full potential ..."
"... the future with our extraordinarily talented employees ..."
Could be a very good scene for a game.
Hope they atleast get to keep their phones... shame really I assume they don’t fire the management first...
It has been interesting seeing Blizzard slowly become a shell of its former self.
Now it's increasingly being eaten by micro-transactions and riding popular franchises.
Epic is making more money with Fortnite alone!
And the new game (Apex Legendary) had a successful start as well which is created by people behind the old Call Of Duty series!